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It is common for property investors to miss items at tax time, which results in lost savings.
Making yourself aware of all of the possible deductions will ensure maximum savings at tax time. Make a great start to increasing your tax return by following these 5 tips
1. Regularly organise your receipts and statements Implement a system to keep track of all receipts and statements related to your investment property, whether it be an accounting program or an excel spreadsheet. This will allow ease when searching for information at tax time. If you must travel to inspect your property, be sure to keep strict records of vehicle/airfare receipts to claim as a travel expense.
2. Make use of a depreciation schedule An accurate depreciation schedule can forecast the deductions to make for each year’s tax return. Ensure you are considering the changes on the property, such as renovations or improvements, as this can impact the depreciation rate.
3. Tenancy costs The cost of repair to property due to damage by a tenant is tax deductible, but is heavily scrutinised by the ATO. Gain detailed invoices for any work that is conducted to ensure you can prove the repairs in the case of reviews. Other tenancy costs that are tax deductible include advertising for tenants, or fees paid to property managers to acquire tenants on your behalf.
4. Prepay interest Although prepaying interest can result in less cash-flow at the current time, it can also be advantageous for property investors. If you are expecting to go down a tax bracket in the next financial year, it may be beneficial to prepay interest now in order to claim it at the higher rate.
5. Seek advice Be sure to seek advice when lodging your tax return, as a professional will be able to ensure all applicable deductions are applied in order to maximise your tax savings.
Through the application of these 5 tips, you will improve your opportunity for tax savings.
I've had years of experience with property and tax, so if you have any questions about tax savings, give me a call today on 08 8120 4877 or email me at tanya@vervegroup.com.au.